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KB Home, Express and Amazon as Zacks Bull and Bear of the Day

Does FireEye (FEYE) have what it takes to be a top stock pick for momentum investors? Let's find out.

For Immediate Release         

Chicago, IL – March 29, 2018 – Zacks Equity Research highlights KB Home KBH as the Bull of the Day and Express, Inc. EXPR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon AMZN.

Here is a synopsis of all three stocks:

Bull of the Day:                                              

KB Homeis still seeing strong demand despite rising mortgage rates. This Zacks Rank #1 (Strong Buy) is expected to see earnings jump 45% as a strong job market continues to underpin the US housing market.

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KB Home is one of the largest homebuilders in the United States with developments in 36 markets in 7 states. It specializes in first time buyers, move-up buyers and active adults. It is headquartered in Los Angeles.

Another Beat in the Fiscal First Quarter

On Mar 22, KB Home reported its fiscal first quarter 2018 results and beat the Zacks Consensus Estimate for the 9th quarter in a row.

Earnings were $0.40 compared to the Zacks Consensus of $0.30, or a 33% beat.

Revenue rose 6% to $871.6 million even as deliveries remained flat at 2,223 homes.

The average selling price continues to rise, jumping 7% to $389,800, even though the company is focusing on first time buyers.

Housing gross profit margin expanded 150 basis points to 16.1%.

Net orders, which is a key metric for home builders, rose 8% to 2,784. Three of the company's 4 regions saw year-over-year increases in net order value.

Company-wide, net orders per community averaged 4.2 per month, up 17% from its prior rate of 3.6 per month.

The backlog has soared, adding 10% to $1.97 billion. That's the highest end of first quarter backlog for the company in 11 years.

Analysts are Bullish on 2018 and 2019

The analysts liked everything they heard from KB Home this quarter. It was among the first home builders to report earnings since the big spike in mortgage rates earlier in the year so there had been some worries going into the report.

But that rate increase isn't dampening demand, so far.

4 estimates have been raised for fiscal 2018 since the earnings report, pushing the 2018 Zacks Consensus Estimate up to $2.69 from $2.40.

KB Home made $1.85 last year, which was one of the strongest years for the company since the Great Recession. And even still, earnings are expected to rise 45% in 2018.

Analysts are bullish on fiscal 2019 as well with 4 estimates also moving higher over the last week. That has pushed the 2019 Zacks Consensus up to $3.35 which would be another 25% year over year increase.

Bear of the Day:

Express, Inc.continues to struggle as its mall based stores try and find their footing. This Zacks Rank #5 (Strong Sell) recently gave disappointing 2018 guidance.

Express is a specialty retailer of men's and women's apparel and accessories. It targets the younger demographic aged 20 to 30 years old.

As of the end of 2017, it operates 635 Express and Express Factory Outlet stores in malls, lifestyle centers and street locations in the United States and Puerto Rico

A Fourth Quarter Earnings Beat

On Mar 14, Express reported its fiscal fourth quarter 2017 results and beat the Zacks Consensus by 2 cents.

Earnings were $0.34 compared to the Zacks Consensus of $0.32.

Sales rose 2% to $693.8 million from $678.8 million in the fourth quarter of 2016 but 2017 was operating in a 53 week period, versus a 54 week the year before. The extra week does make a big difference to the retailers.

Comparable sales, one of the key retail metrics, fell 1% compared to a decrease of 13% in the year ago quarter. The comps included e-commerce sales.

E-commerce, however, was a bright spot. It rose 20% to $203.3 million and on a comparable sales basis, e-commerce sales were up 17%.

Express also increased its merchandise margin by 130 basis points due to sourcing-related cost savings.

Guides Fiscal 2018 Under Consensus

All of this sounds good. While comps were still negative on the holiday quarter, they were a sharp improvement over the prior year results.

However, Express gave cautious full year guidance.

It sees fiscal 2018 comparables between -1% to 1%.

Earnings are expected in the range of $0.32 to $0.46.

The Zacks Consensus was looking for $0.50 so it's not surprising that 3 analysts cut estimates. That pushed the new Zacks Consensus down to $0.41, which is in line with the new guidance.

That's still an earnings gain of 13.9% from 2017, where the company made $0.36.

But those estimate cuts are what results in the Zacks Rank #5 (Strong Sell) designation.

Express is also still trying to get its mix right. It has been closing the traditional Express stores and re-opening many of them as remodeled Express Factory Outlet stores.

For example, in fiscal 2018, it expects to close 36 traditional stores but rebrand 28 of them as outlets.

By the end of fiscal 2018, it expects that 28% of its stores will be the outlets which sells its own proprietary merchandise.

Express is Shareholder Friendly

Despite its recent problems, the company finished 2017 with $207.4 million cash and cash equivalents on hand.

It has no debt, which is rare for a retailer, and generates solid cash flow.

Through the week of Feb 3, 2018, it repurchased about 2.1 million shares for $17.3 million under a $150 million share repurchase program authorized in November 2017.

Subsequent to the year end, it purchased another $8 million, or 1.1 million shares and has $125 million remaining under the authorization.

Shares Continue to Sink

It's been tough being a shareholder of Express over the last 2 years.

Shares are down 66% during that time, while the S&P 500 has returned 30%.

Year-to-date, they've fallen another 23.5%.

Additional content:

Did President Trump Send Amazon Stock Lower?

Shares of Amazon dipped about 4% in morning trading Wednesday after reports suggested that President Donald Trump is not a fan of the e-commerce company and would like to adjust its tax treatment.

Citing five sources that have talked to the president about Amazon, Axios said that Trump wants to “go after” the Jeff Bezos-led company. Trump has also suggested altering the company’s taxes because several of his friends have told him that Amazon is hurting their own businesses and “killing shopping malls and brick-and-mortar retailers,” the media outlet reported.

“He’s obsessed with Amazon,” one source told Axios. “Obsessed.”

Amazon shares slumped as low as $1,386.17 in early morning hours Wednesday, which marked more than a 7% dip from Tuesday’s close. Trump’s reported comments likely spooked investors amid continuing volatility that has pummeled the tech sector this week.

Of course, this is not the first time investors have heard Trump’s opinion of Amazon. The president has made several public remarks about the e-commerce brand before, including a number of posts on Twitter that question the company’s tax strategies.

“Amazon is going great damage to tax paying retailers. Towns, cities, and states throughout the U.S. are being hurt – many jobs being lost!,” Trump tweeted on Aug. 16, 2017.

The president also appears to have disdain for Jeff Bezos, who also owns The Washington Post—a newspaper that has been vocal critic of the Trump administration. Trump has repeatedly referred to the publication as the “Amazon Washington Post.”

Nevertheless, the White House has not taken an official stance on Amazon and the tax practices of e-commerce companies yet. Amazon does collect sales taxes from shoppers in all states with a sales tax, rounding out its list with four new states in April 2017.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.

See This Ticker Free >>

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

Looking for Stocks with Skyrocketing Upside?

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See the pot trades we're targeting>>

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

Download it free >>

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